Lehman about to file Bankruptcy. US 3rd largest brok. firm

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September 15, 2008 11:11 AM

Dear Investors

Today Indian market opened sharp 700 points down on the concerns of Lehman bankruptcy, the US 3rd largest brokerage firm, 158 years old company.

But, you all knew about the same earlier. Remind you , this is the beginning. Washington Mutual Fund is in queue and Wachovia is also at risk.

Could you understand Why Fed did not try to bail out Lehman? B’caz they know this is the beginning and they do not see end of this pain in short to medium term.

Good news for you God rose $22 on the back of this news to $787. You are yet to see many major events.

Be brave heart and Buy Gold.

Lehman on the brink

SAN FRANCISCO (MarketWatch) — Lehman Brothers Holdings Inc. teetered on the edge of insolvency Sunday night as potential acquirers backed away from a deal and federal officials balked at committing taxpayer funds to help save the Wall Street giant.

Last-minute talks with Barclays PLC.

Barclays PLC faltered Sunday, leaving few options left for the 158-year-old firm.

The potential failure of one of Wall Street’s oldest firms came as the fallout from the U.S. housing collapse and global credit crunch intensified more than a year after problems first surfaced.

The International Swaps and Derivatives Association organized a special trading session to reduce financial risk in the event of a bankruptcy filing Sunday.

Federal officials have been struggling to organize an acquisition or private-sector bailout of Lehman because of fears a bankruptcy could cause severe problems in the already fragile financial markets.

But they are anxious not to commit any more taxpayer dollars given the massive bailout of mortgage giants Fannie Mae and Freddie Mac last month and the guarantees offered to facilitate the rescue of Bear Stearns last spring. See related First Take commentary

Even as Lehman’s rescue efforts faltered, Merrill Lynch and Bank of America had reportedly entered merger talks. See Wall Street Journal story

Insurance giant AIG is set to announce major restructuring plans on Monday as well. See related story

And Wall Street analysts remain concerned that mortgage lender Washington Mutual which saw its shares plunge last week, could also be at risk.

Lehman’s roots

From its start as a cotton trading firm in Montgomery , Ala. more than 150 years ago, Lehman grew into the third-largest U.S. brokerage firm behind Morgan Stanley and Goldman Sachs

It was a fixed-income powerhouse and the largest mortgage underwriter.

The firm’s mortgage business, while hugely profitable during the recent housing boom, proved its undoing as home prices slumped, foreclosures surged and the commercial real estate market began to crack.

In its latest quarter, Lehman reported a net loss of almost $4 billion after more than $5 billion of new write-downs, mostly on soured mortgage exposures. Read full story.

The firm unveiled plans to sell businesses and jettison at least $25 billion of troubled commercial real estate assets, but investors and trading partners continued to desert the firm, leaving it rushing to find buyers for the whole company. See full story.

Lehman had survived near-death experiences before and long-time Chief Executive Richard Fuld had always rejected selling the firm. However, the current credit crunch is the worst crisis to hit Wall Street in more than two decades, according to one former Lehman executive.

“No one, currently working on Wall Street, has ever experienced a credit event like the one we are currently facing,” Bernstein Research analyst Brad Hintz, a former Lehman chief financial officer, wrote in a note to investors earlier this month. “The credit events the market has lived through since 1980 … appear like ripples in a pond compared to the plunge we are currently

experiencing

Regards,

Dhaval Shah

Investment Academy| Baroda | 09825528815

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2 responses »

  1. Pingback: Launching Two New Services « Investmentacademy's Blog

  2. Pingback: Two Successful Years of taming the Market « Investmentacademy's Blog

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